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Analytical History of Heavily Indebted Poor Country (HIPC) Debt Sustainability Targets

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  • Hjertholm, P.
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    Abstract

    This paper traces the origins of World Bank indicators of debt_distre­ss and their employment as HIPC sustainability targets. These targets are interpreted as 'switching values', below which countries are (on average) expected to avoid debt service problems, but as such, they do not take into account that countries encounter debt service problems for a variety of reasons and at different levels of debt. It is likely that the 'true' witching value of the debt to export ratio of several HIPCs lies below the lower bound of the present target range. Regarding the 'fiscal window' , the lack of analytical basis for a 280 percent target for the debt to revenue ratio is noted, and the consistency problems raised by the added 'openness_tax' condition are discussed. Moreover, the implications for economic performance of the pursuit for a sustainable debt position remain a concern. It seems uncertain whether the development needs of HIPC countries can be accommodated within sustainable debt paths, as envisioned. The paper concludes that the sustainability targets, as presently applied, are not well supported in analytical terms. The rationale for adopting an average target range for the debt indicators involved remains weak, and the adoption of country_specific targets is suggested as a way to tailor debt relief more accurately to country needs.

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    Bibliographic Info

    Paper provided by Carleton - School of Public Administration in its series Papers with number 00-03.

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    Length: 45 pages
    Date of creation: 2000
    Date of revision:
    Handle: RePEc:fth:carlad:00-03

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    Postal: Carleton University, School of Public Administration, Ottawa, Canada K1S 5B6.
    Web page: http://www.carleton.ca/sppa/
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    Related research

    Keywords: DEBT ; DEVELOPING COUNTRIES;

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    Cited by:
    1. Rolf Maier, 2005. "External Debt and Pro-Poor Growth," Macroeconomics 0504031, EconWPA.
    2. Maier, Rolf, 2005. "External Debt and Pro-Poor Growth," Proceedings of the German Development Economics Conference, Kiel 2005 23, Verein für Socialpolitik, Research Committee Development Economics.

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